SINGAPORE: Profits on refining fuel oil have been hammered to multi-month lows over the past two weeks on emerging signs of growing supply and faltering demand, retreating from stubbornly elevated levels at the start of the quarter. By the end of October, fuel oil refining margins in Singapore were around 30 percent higher than the same time a year ago. They were boosted by expectations that the Organization of the Petroleum Exporting Countries would continue propping up crude oil prices by withholding supplies of fuel oil rich grades, as well as by lower output from key producers like Russia and Venezuela. But some indications of growing supply and weaker demand conditions have recently dragged on fuel oil refining margins, four trade sources said. "Fundamentals are looking slightly weaker and (refining) margins were probably over-extended,” said one Singapore-based fuel oil trader. Pakistan State Oil (PSO), a key Asian fuel oil consumer, recently cancelled a tender to import up to 565,000 tonnes of fuel oil for January delivery and announced it would suspend imports of the fuel as the country turns to liquefied natural gas (LNG) to fuel its power sector. PSO in 2017 imported an average of about 400,000 to 650,000 tonnes of fuel oil a month, and its lower fuel oil demand has this week driven stocks of the fuel in the Fujairah oil hub in the United Arab Emirates, where most of its imports are sourced, to a more than four-month high.
